Managers do not save on employees – Newspaper Kommersant No. 211 (7412) dated 11/15/2022

The business of Russian management companies is declining, although not at a very fast pace. For three quarters, the remuneration of reporting companies decreased year-on-year by 9%, net profit – by 8%. At the same time, managers continue to increase personnel costs, adjusting the business to new market conditions.

At the end of nine months of 2022, revenue from core services of Russian management companies (MCs) decreased by 9.4% (to RUB 16.6 billion for companies that disclosed financial statements). This follows from the reporting under RAS of more than 160 management companies – this is 63% of all active market participants, which account for more than 40% of revenue from trust management services (DU). This number does not include a number of large companies that are members of banking groups and have not disclosed their financial statements since the beginning of the year. The net profit of the considered companies decreased by 8.1%, to 4.6 billion rubles.

At the same time, it should be noted that less than 40% of the considered companies were affected by the decline in revenue. And, first of all, it was observed among those, a significant share of whose business is retail funds and individual clients. In some cases, it has decreased by 10-30%. According to market participants, the key reason for the decline in companies’ revenues is the fall in the value of assets, including due to revaluation, and the departure of some customers.

According to Kommersant’s estimate, the assets of retail mutual funds have fallen by a quarter since the beginning of the year, to 850 billion rubles, which was associated with a decrease in the value of market assets, as well as an outflow of 26 billion rubles. “A slight decrease in revenue is observed in the retail segment, which has temporarily weakened its activity in the market, respectively, revenues from actively managed funds have decreased,” says Irina Krivosheeva, head of Alfa Capital.

Out of the picture are young retail companies that show an influx of funds into funds, as well as management companies specializing in closed-end mutual funds — they showed revenue growth of 10-50%. “As a rule, closed-end mutual funds are formed to implement medium- and long-term projects. This kind of investment is more protected from market conditions. And although changes in the external environment affect them, this does not happen in the moment, as is the case with market instruments, and the management company has more time and opportunities to take actions to stabilize the asset,” says Dmitry Yartsev, Deputy General Director of KSP Capital Asset Management .

Despite the general decrease in remuneration, management companies are still increasing their personnel costs. According to Kommersant’s estimates, the total costs for employees increased by more than 10% (compared to last year), to almost 8 billion rubles. Costs increased by three-quarters of the companies, which was associated with both recruitment and retraining of personnel. An interlocutor in a large management company notes an increase in the shortage of back office and internal control specialists. “Since the beginning of the year, the burden on the industry has increased due to sanctions restrictions, companies are forced to separate or spin off their business, duplicating infrastructure, and these are documents, reporting and accounting,” Kommersant’s interlocutor notes. “During the reporting period, the costs of retraining specialists from the US and European markets to Asian markets increased,” said Irina Krivosheeva.

Regarding the prospects for the coming quarters, market participants are cautious, noting that the current crisis is the worst for the industry since 2008. “To predict now what the market will be like in 2023, what products and ideas will be more in demand, is very difficult. It can be expected that not all management companies will be able to achieve their goals set for 2022, which will entail changes, including, possibly, cost reduction,” notes Dmitry Yartsev. First of all, companies will cut the cost of promotion, and only as a last resort – on staff. Revenue will grow dynamically in the direction of alternative products, including in terms of closed-end mutual funds of real estate. “We do not change the strategy, goals and objectives, but we are adjusting some intermediate indicators. Now we are more focused on wealthy retailers and wealthy investors,” notes Irina Krivosheeva. Pervaya Management Company announced plans to expand the product line with the help of conceptually new instruments in terms of shell, as well as by expanding the geography of investment instruments with a focus on Asian markets.

Vitaly Gaidaev, Dmitry Ladygin